October hogs closed sharply higher on the session yesterday, after first moving to the lowest prices level since July 5th ahead of the USDA supply/demand report. The report was seen to support sharply higher trading in corn and other grain markets, which in turn was widely thought to support hog futures. The hog market likely also found support from a surge higher in cattle, corn, the stock market and other commodity markets. While October futures traded near 88.00, the CME cash index came in at 107.64. Some traders see better weather ahead for weight gains, as well as a weakening cash market as supply increases into the fall that may have already been "priced-in" with the huge discount of futures to the cash market. Other traders are now trying to factor in the potential for China import demand ahead and its potential for limiting the downside in the cash market into the fall. Expectations for declining poultry production in the months just ahead plus the strong rally for cattle futures yesterday were also seen by many in the market as positive factors. There was some minor positive news from the monthly supply/demand report as exports for 2011 were revised higher by 140 million pounds and production revised lower by 19 million pounds. For reference, weekly pork production is about 400 million pounds. For 2012, production was revised down 20 million and exports up by 135 million. The CME Lean Hog Index as of August 9th came in at 107.64, up 22 cents from the previous session and up from 104.45 the week before. The estimated hog slaughter came in at 409,000 head yesterday. This brings the total for the week so far to 1.620 million head, up from 1.556 million head last week at this time and up from 1.602 million head a year ago. Pork cutout values released after the close yesterday came in at $109.43, down 72 cents from Wednesday but up from $108.10 the previous week.
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